Sunday, May 23, 2010

A few suggestions for counts can be seen above. This has changed slightly from Thursday's update, but the view has not changed. The best options appear to be a wave B double or triple unfolding as the two above counts suggest, although the wave [2] top suggested on 5/13 is not a bad choice considering these options.

Some have been asking why I believe a correction has unfolded since the last recovery high given that almost all of the advance since February has been retraced. The answer is simple; using the guidelines of Elliott Wave Theory, there is no impulsive count lower since the peak and no desirable alternate corrective count higher since March 2009. Consider the 4/26, 4/29, or 5/3 peaks to the 5/6 low. If there is actually an impulse lower in any of these positions, then the practice of the Theory on this level does not have much value.

Perhaps even more important, consider the alternate count above that would be required (in my estimation) to explain a 4/26 wave [2] top; it also makes little sense. Again, there is too much guessing and not enough "analysis" involved if this count is actually correct. However note that wave [2] can still be counted complete if the truncated count suggested in the first chart is correct; this addresses both of the concerns.

I believe a strict interpretation of the theory is required to provide discipline to the analyst and to provide quality analysis. The mistakes I have made on this blog, as I see it, are the result of bending the guidelines. The is an art however of balancing the guidelines with the price patterns at other levels of the fractal while using prior market experience.

If wave [2] has completed, that high may actually have been 5/13 as suggested above. This requires something like the count shown in the above 1 minute chart however which is odd. The marked (v) of [iii] waves does look like an impulse however. So this is an example of a need, not a want, to bend some guidelines in one direction or another; either the rally 5/11 is not an impulse and something similar to the larger pattern in the above chart is correct, or 5/11 was actually a zigzag and there was an ending diagonal 5/11-5/13 (with its last leg looking like a 5-wave pattern). It is similar to the 4/13-4/15 wave looking like a double zigzag, but the 4/19-4/21 wave looking like an impulse; the wave [iv] triangle suggested in the first chart would violate a guideline, but so does the wave A top 4/15.

To be clear, if the 2/15 low is broken next week, this is actually a good thing; the wave [2] top can then be labeled as completing without altering the larger count, and the downtrend can be more or less confirmed.

The bounce following Friday's low looks corrective at this time, but higher prices, particularity beyond 1100, can change this view.

A few suggestions for counts can be seen above. This has changed slightly from Thursday's update, but the view has not changed. The best options appear to be a wave B double or triple unfolding as the two above counts suggest, although the wave [2] top suggested on 5/13 is not a bad choice considering these options.

Some have been asking why I believe a correction has unfolded since the last recovery high given that almost all of the advance since February has been retraced. The answer is simple; using the guidelines of Elliott Wave Theory, there is no impulsive count lower since the peak and no desirable alternate corrective count higher since March 2009. Consider the 4/26, 4/29, or 5/3 peaks to the 5/6 low. If there is actually an impulse lower in any of these positions, then the practice of the Theory on this level does not have much value.

Perhaps even more important, consider the alternate count above that would be required (in my estimation) to explain a 4/26 wave [2] top; it also makes little sense. Again, there is too much guessing and not enough "analysis" involved if this count is actually correct. However note that wave [2] can still be counted complete if the truncated count suggested in the first chart is correct; this addresses both of the concerns.

I believe a strict interpretation of the theory is required to provide discipline to the analyst and to provide quality analysis. The mistakes I have made on this blog, as I see it, are the result of bending the guidelines. The is an art however of balancing the guidelines with the price patterns at other levels of the fractal while using prior market experience.

If wave [2] has completed, that high may actually have been 5/13 as suggested above. This requires something like the count shown in the above 1 minute chart however which is odd. The marked (v) of [iii] waves does look like an impulse however. So this is an example of a need, not a want, to bend some guidelines in one direction or another; either the rally 5/11 is not an impulse and something similar to the larger pattern in the above chart is correct, or 5/11 was actually a zigzag and there was an ending diagonal 5/11-5/13 (with its last leg looking like a 5-wave pattern). It is similar to the 4/13-4/15 wave looking like a double zigzag, but the 4/19-4/21 wave looking like an impulse; the wave [iv] triangle suggested in the first chart would violate a guideline, but so does the wave A top 4/15.

To be clear, if the 2/15 low is broken next week, this is actually a good thing; the wave [2] top can then be labeled as completing without altering the larger count, and the downtrend can be more or less confirmed.

The bounce following Friday's low looks corrective at this time, but higher prices, particularity beyond 1100, can change this view.

My trading philosophy is 95% based on my own Elliott Wave analysis of the S&P 500. I try to keep my analysis and trading as simple as possible and do not use trend lines, channels, or definite retracement, price, or time targets. To me, inspecting the proportionality and symmetry of a market's price structure is the key to mastering the principle; it is through this that low-risk, high-reward trading opportunities are found.

Because they are the only things I look at when trading, the quality of the charts I post on this blog are very important to me. I think you will find my work to be the best Elliott Wave analysis of the S&P 500 on the internet.